Before we look at the trust administration process, we should explain why you may want to use one. A lot of people assume that a last will is the estate planning document that should be utilized if you are not a multimillionaire. In reality, this is a commonly held misconception.
It can seem as though a last will is a very simple document that would facilitate efficient transfers to the heirs, but this is not the case. With regard to the simplicity, a last will need not be very complicated in many instances, but the efficiency is simply not there.
When a last will is used, you name an executor (known as a Personal Representative in South Carolina) to act as the estate administrator. The executor would not be allowed to immediately follow the instructions that are laid out in the last will with regard to asset transfers.
Under the laws of the state of South Carolina, the will would be admitted to probate, and the probate court would provide supervision during the estate administration process.
Creditors are given a number of months to come forward seeking satisfaction, and there are innumerable tasks that must be completed by the executor. In all, it can take eight months to a year for a simple case to run its course. The heirs that are named in the last will do not receive their inheritances during this interim, so the waiting game is not a very pleasant one.
In addition to the consumption of time, there are a couple of additional probate drawbacks. Expenses accumulate during the process, including a filing fee, legal fees, accounting charges, payment to the executor, appraisal and liquidation expenses, and other incidentals. These expenditures reduce the value of the estate that will eventually be distributed among the inheritors.
Another probate drawback is the loss of privacy. Anyone that has an interest can access probate records to find out how the resources were distributed. This can be disconcerting in a general sense, and this information can potentially cause hard feelings among family members and others.
These pitfalls can be avoided through the use of a revocable living trust. With this type of trust, the assets can be distributed to the beneficiaries outside of probate. As a result, all the drawbacks are avoided.
This is one type of trust that can be useful for a wide range of people, but there are others. The right choice will depend upon the circumstances, and this is why you should discuss everything in detail with an estate planning attorney.
The Role of the Trustee
Now that we have set the stage appropriately, we can get to the point of this post. The anatomy of a living trust starts with the grantor, which is the person who creates the trust. There is a trustee who serves as the trust administrator; this is similar to the role of the executor when a will is utilized.
With any trust, the beneficiary is the individual or entity that can receive distributions from the trust. If you are the grantor of a revocable living trust, you can serve as the trustee and the beneficiary while you are alive. In this manner, you do not lose any control of the assets.
The purpose of the trust is to serve as an estate planning vehicle, so you have to account for actions that will take place after you are gone. To this end, you name a successor trustee to manage the trust after your passing, and you name your heirs as the successor beneficiaries.
When you are selecting a trustee, you can name someone who you know personally who is trustworthy and good at managing money. However, there are other options available. You could engage the services of a trust company or the trust department of a bank.
If you use a professional fiduciary to act as the trustee, there is inherent oversight, and there are no conflicts of interest. Plus, a corporate trustee will be an investment expert, and this can be a valuable skill if you have income producing assets in the trust.
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